“Do I Need a software package to do my book keeping?” is a common question that many software resellers get asked. In all honesty, they are the wrong people to ask, because they of course, have a vested interest in saying “Yes you do!”
The question that should be asked is “How do you keep track of the finances for your small business?”
It is fair to say that book keeping, generally sits right at the bottom of the priority list when starting a business. The need to generate income quite rightly comes first, so until that happens, no-one need worry about doing the books. In the early days, it was common to see book keeping as a yearly chore, to be tackled only when tax return time looms.
When customers need to be invoiced, it is typically Excel or Word that is summoned for the task, which is fine, until months or even years later, someone realises that they need to get their financial record keeping in order. Once your business is growing and you need to look after your finances more formally, what are your options?
Can I use a spreadsheet for my bookkeeping?
For a brand new business, the answer is yes. When finances are relatively simple, Excel is totally up to the job. It’s a cheap option, which is important in the early days when your income and cash flow can fluctuate rapidly. Using Excel means you can keep track of your income and expenses in a relatively simple straightforward manner.
However, as the business becomes more established, you will undoubtably find it time to move to something a bit more sophisticated. A fact recognised by many, is that spreadsheets can be unreliable; the general consensus of opinion is that every spreadsheet contains a minimum of five errors. They can easily get muddled or saved incorrectly, formulas get corrupted and many inexperienced users don’t recognise the ongoing problems. It is only when a book keeper, or the accountant gets hold of the data, that fundamental issues are found.
When evaluating accounting software, looking at the way you use your spreadsheets might be useful as a guide when making your choice. How often do you look at your spreadsheets? What kind of information are you interested in from them? What jobs would you like to automate? All these things can help you make a better choice when it comes to deciding on a software package.
What about Making Tax Digital (MTD)?
There has been a lot of talk about Making Tax Digital (see our post on the subject here). In essence, MTD means that you will have to use a software tool to submit any returns to HMRC. Even though deadlines are fast approaching, nobody knows exactly what this is going to look like yet and not all businesses will be affected immediately. We also don’t know which software will be compatible, although it is highly likely that the big names will be, Sage being one of the first to announce their commitment to MTD, but some of the smaller and non-UK based companies such as VT and Wave may not. The safe assumption is that it looks like you will need to move to some kind of software in the longer term for Making Tax Digital.
I want to move on from Excel but I don’t feel quite ready for accounting software. Are there any other options?
There are always options, but it is difficult to know where to start. ‘What software would you recommend?’ is a question that every accountancy firm gets asked and let’s be honest, most of them will recommend the software that they are familiar with, not the one that might be a better fit your business.
Sage One Accounting
Sage One is a true online accounting tool with an entry level price band of £10.00 per month.
Sage One Accounting features include:
- Calculate VAT returns easily including compliance with international VAT rules
- Standard, Cash Accounting or Flat Rate VAT schemes
- Share information with your accountant in real time
- Control user access to sensitive information
- Multiple business accounts held in a single login
- Multi-currency transactions with live exchange rates
- Easy sales invoice and credit note templates with guides to help add logos and extra text
- Track business expenses
- Easy purchase invoice input with multiple nominal record output and extra analysis fields
- Integral Profit and loss, balance sheet and cash flow reports
- Easy to understand dashboards
- Bank reconciliation with integral correction facility for mis postings
- Record contact details on customer and supplier records and hold notes
- Create recurring income and expense transactions to save time
- Email customer statements automatically
- Batch payments against outstanding invoices
- Integrate with Sage Pay to import online transactions
- Monthly fee includes customer support 24/7, 365 days a year from anywhere in the world
Sage One Payroll
For a small business PAYE solution, Sage One Payroll is an excellent choice.
Sage One Payroll features include:
- HMRC recognised
- Auto Enrolment pension compliant
- RTI (Real Time Information) compliant
- No payroll experience required
- Setup and process payroll for up to 15 employees
- Easy setup for all pension schemes approved by the Pensions Regulator including the NOW, NEST or People’s Pension schemes
- Automatic assessment of your employee’s pension status every time they are paid
- Effortless management of postponement, opt in, opt outs and join requests
- Keep track of pension contribution payments to your Pension Provider
- Create secure automatic enrolment emails or letters to your employees
- Record and resend any automatic enrolment communications
- Automatic Enrolment guide to help you through the pension setup
- Monthly fee includes customer support 24/7, 365 days a year from anywhere in the world
Are there cheaper options?
There are so many options out there, but prices can be very competitive and all of the different suppliers jostle for your business. Kashflow, FreeAgent and ClearBooks all have affordable options that can work for freelance businesses. Like Sage One, QuickBooks Online and Zero have graded options, so that you can start on a cheaper version and then build up as your business grows.
There are also a couple of free options from Pandle and Wave. Keep in mind though, Wave is an American solution so it doesn’t deal with UK VAT very well, and it is unlikely to be ready for Making Tax Digital in 2019.
How do I get started?
The best answer is to set aside some time and do your research. No-one really enjoys it, but time spent at the beginning of this process is well spent and may save you a fortune in lost time and money, if you go for the wrong solution just because you didn’t make the time to look around.
Speak with businesses you know and trust to see what they use, particularly if they’re in the same line of work or have a similar-sized business. They should give you an honest review, both good and the bad and someone else’s experience is always more informative than marketing spiel or the view of a software sales person who is biased towards their own offering. It is also worth asking your accountant, if you have one, as they are the people who will pick up the data at the end of your financial year, so they have a vested interest.
You can usually take a free trial of the software, so pick a few that you like the look of and have a play with them. You might find one more intuitive than the other and it will give you an idea of what you do and don’t like, which will help in your decision making process.
Once you are ready to get started, look online, as there is often free online training with accounting software, which would be a good starting point. For those looking to get the best out of their chosen software, a course with a qualified trainer is invaluable.